While 2019 income forecasts are expected to be above 2018, they’re still dramatically lower than the average over the past 91 years. In 2019 experts expect net farm income to reach $69.4 billion, 2018 hit $64.2 billion and the 91-year average (adjusted to 2019 dollars) is $84.2 billion.
“Although the forecast for higher income caught most of the headlines, farm financial conditions are still challenging,” said David Widmar and Brent Gloy in a recent post on Agricultural Economic Insights. “Since 1990, net farm income has only been less than $70 billion six times.”
The pair is quick to point out that even though three of the six below-$70 billion years were in the past four years, 2016, 2017, 2018 and 2019, current conditions are significantly stronger than in the 80s when real farm income fell before $50 billion (in 2019 dollars).
Notably, 2018 marks the lowest income year since 2002, obviously even lower than 2016 which had served as the “low-water” mark for the current slowdown, the economists explained. Without MFP payments 2018 income would have dropped below $60 billion and put it back into levels not seen since the 1980s.
A portion of MFP payments weren’t distributed in 2018. That $3.5 billion was included in the forecasted net farm income for 2019.
Increased forecasts for farm income come from lower production expenses and higher crop values. Together, they add $9.6 billion to the pile. However, decline in direct payments and other unnamed costs drive the total down to just a $5.2 billion increase over this past year.
Credit: Agriculture Economic Insights
“The USDA’s first estimate of 2019 farm income provides some positive news,” the economist wrote. “First, real net farm income is expected to be 8% higher. Second, the major sources of these improvements—higher values of production and lower costs of production—are encouraging.”
Because this is just a forecast, time will tell if these numbers hold true for 2019.
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